Honda Motor Europe Ltd & Ors v Tony Powell & Ors (2014)

Summary

A deed of adherence added a new associated employer to a pension scheme and extended the benefits of the scheme to the new employer's employees. Without further documentation, the deed did not limit those employees to less generous benefits under the scheme, as the employers had intended.

Facts

The appellant employers (H1 and H2) appealed against a decision ([2013] EWHC 3149 (Ch), [2013] Pens. L.R. 417) on the meaning and effect of a deed of adherence by which H2 had become a party to a pension scheme established for the employees of H1.

H1 was the sales and marketing arm of the Honda car group in the United Kingdom. It established a pension scheme for its employees who were predominantly office and administrative staff. Honda then decided to establish a manufacturing base in the UK and H2 was incorporated for that purpose. It was decided that pension benefits for H2's employees would be provided via the scheme but that the benefit scale for H2's employees should be less generous than the benefit scale for H1's employees. H2 joined the scheme in 1986 as a new participant and associated employer by way of a deed of adherence which stated that H1 "hereby extends the benefits of the Scheme to all eligible employees and directors" of H2. The scale benefits structure for H2 employees, which had been announced in 1986, was not formally incorporated into the scheme's trust deed and rules until 1998. The issue was what benefits H2 employees were entitled to in respect of service between 1986 and 1998. That turned on whether the deed of adherence, without further documentation, conferred H2 scale benefits on H2 members or whether they were entitled to the same benefits as H1 members. The claim concerned interpretation only and issues of rectification were reserved. The judge held that the deed of adherence did not confer scale benefits on H2 members which differed from those under the pre-existing scheme.

Held

(1) As a matter of interpretation the deed did not vary the scheme except by extending it to a new participating employer and a new category of potential members. The deed did not refer to the announcement of the H2 scale benefits. It was clear that adherence to the scheme and the level of benefits had been treated as two separate questions. There was nothing in the deed or background indicating that the deed was to effect any more than the exercise of the power to extend the existing scheme to a new participating employer and a new category of member. Exercise of the separate power to amend the rules could have been achieved either by a modified form of announcement signed by the trustees or by a separate writing signed by the trustees which could have come into existence contemporaneously with the deed or at any time thereafter. If either had happened the deed would have been drafted in exactly the same way. Any problem would have been instantly cured if the trust deed and rules had been amended. That result could not be achieved by a process of interpretation. Nothing had obviously gone wrong with the language of the deed. It gave effect to a decision to extend the benefit of the scheme to H2 members, Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 A.C. 1101 considered (see paras 23-31, 38 of judgment). (2) Since the deed did not purport to confer H2 scale benefits, there could be no implied exercise of the power to amend the scheme to do so, Davis v Richards and Wallington Industries Ltd [1990] 1 W.L.R. 1511 considered (paras 39-40). (3) The appeal court refused to permit the appellants to raise a new argument that once the deed had been executed H2 had a right in equity to compel H1 and the trustees to exercise the power of amendment, and that since equity regarded as done that which ought to be done the parties were treated as having validly exercised the power of amendment in order to incorporate the H2 scale benefits. That argument could and should properly be dealt with in any proceedings for rectification (para.43).